Here is a great article (considering it’s bbc) regarding the next pending flash crash of the markets no thanks to algo trading (High Frequency Trading – HFT).
http://www.bbc.co.uk/news/magazine-19254835
Algo trading is also called automated trading, black-box trading, whitebox trading and robo trading. These trades have no human intervention and account for up to 70% of the markets worldwide. Scary stuff considering over $2 trillion is traded on forex… daily (this figure could be as high as $4trillion.. a day). A glitch in the matrix could have devastating consequences as we saw during the flash crash of May 6, 2010, affectionately called The Crash of 2:45
Picture shows flash crash algorithm anomaly on the SP500 at 2.45am. (chart shows 1:45 due to broker time difference)
As if market manipulation wasn’t enough to contend with for the average Joe Bloggs retail trader, there is also algos to compete with, you see a double bottom forming, a harami, pinbar etc, then chances are the algos are already waiting to pounce and stop you out. The swines.
Here is a great video describing high frequency trading and algorithms
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January 22nd, 2013 at 3:25 am
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